Weekly Articles 2011

The fatal attraction of government is that it allows busybodies to impose decisions on others without paying any price themselves. That enables them to act as if there were no price, even when there are ruinous prices — paid by  others.
– Thomas Sowell

The struggle for freedom … is not the struggle of the many against the few, but of minorities — sometimes of a minority of but one man — against the majority.
– Ludwig von Mises

The greatest Glory of a free-born People, is to transmit that Freedom to their Children.
– William Havard

The War on Freedom
What would we do without Barrack Obama as President?  I mean it is amazing.  The guy proved he was an American citizen and got public enemy number one all in the same week!  And what ladies and gentlemen do we get as a reward for this PR stunt?  Well, we immediately got more terror threats and fear mongering as we were conveniently told we were back on a war footing (the never ending “war on terror” just like Orwell wrote about in 1984).  We saw an infant being frisked by the TSA as a potential terrorist.  We also now find out that ALL cell phones will be equipped with a chip that will then be able to blast out warnings or instructions from our criminal, incompetent and corrupt Federal government.  Wait, here’s the best part NO ONE can opt out.  If you have a cell phone you will be required to get these messages.  I can’t wait to have Obama propaganda blasting me 24/7.  Again, this is straight out of the 1984 police state playbook.  Even if you think this service is a good idea you should still be very disturbed that you do not have a CHOICE in the matter.  Think about what Obama has done since he got into office.  This guy is all about taking away you choices, your freedoms.  First, he rams through a very unpopular healthcare bill that is designed to force you to act in a certain manner.  Now you are being forced to receive government messages on your cell phone.  This whole charade shouldn’t be called “The War on Terror.”  It is actually all about keeping the citizenry terrified.  The government loves keeping you in a state of fear so that then they can do anything they want to the little sheep.  It should be called “The War on Freedom.”  Your freedom.

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Gold today is no longer related to the normal economic cycle of supply and demand, jewelry, Indian wedding seasons, rain in the Middle East.  All those things are passé, forget about them.  Gold is driven today by one overriding and I am afraid, at least in my opinion, an irresistible and irreversible trend.  A fundamental, global and growing insecurity… A fundamental, global and growing lack of confidence of the world in everything they were brought up to believe.  Institutions, insurance companies, banks, issuers of mortgages, ratings agencies, equities, sovereign debt, Federal Reserve Banks.  Portugal and Iceland.  Greece and Spain.  Currencies.  What is left?  What is left?
– Peter Munk, Chairman of Barrick Gold

Bureaucracy defends the status quo long past the time when the quo has lost its status.
– Laurence J. Peter

The Big Lie
I feel completely blessed to be alive right now.  To be a witness and participant in a moment in human history that will be written about and passed down in tales for as long as humanity remains on this planet.  We are currently observing the evaporation of what Nazis referred to as “The Big Lie.”  In very basic terms the concept of The Big Lie is that if you are going to lie you may as well lie big.  So big in fact that the majority of well meaning citizenry could never imagine anyone lying on such a grand scale (particularly not their government “officials”) so that they don’t even question the basis of their own reality.  In the case of the United States the Big Lie is that we have a free market capitalist economy.  Instead we have a corporatist/fascist economy that enriches three main groups.  Wall street financiers, the military industrial complex and large multi-national corporations that don’t pay taxes.  So that begs the question, how can the American people be so brainwashed into thinking they live in this false reality?  It’s very easy.  It’s all about the money.

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The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation.
– Barack Obama in an interview with the Boston Globe on December 20, 2007

If the administration believes that any — any — use of force against Iran is necessary, the President must come to Congress to seek that authority.– Hilary Clinton in 2007

“Well, we would welcome congressional support,” the Secretary said, “but I don’t think that this kind of internationally authorized intervention where we are one of a number of countries participating to enforce a humanitarian mission is the kind of unilateral action that either I or President Obama was speaking of several years ago.”
– Hilary Clinton in 2011 when asked why not go to Congress for approval of the “Kinetic Military Action” (Newspeak for War) launched against Libya

From my simple reading, the Constitution is fairly clear on the subject: Congress is given the power to declare war. At that moment, the president as commander in chief is free to prosecute the war as he thinks best. But constitutional law and the language of the Constitution seem to have diverged. It is a complex field of study, obviously.”

And now in Libya, we have reached the point that even resolutions are no longer needed.

It is said that there is no precedent for fighting al Qaeda, for example, because it is not a nation but a subnational group. Therefore, Bush could not reasonably have been expected to ask for a declaration of war. But there is precedent: Thomas Jefferson asked for and received a declaration of war against the Barbary pirates. This authorized Jefferson to wage war against a subnational group of pirates as if they were a nation.

I began by talking about the American empire. I won’t make the argument on that here, but simply assert it. What is most important is that the republic not be overwhelmed in the course of pursuing imperial goals. The declaration of war is precisely the point at which imperial interests can overwhelm republican prerogatives.
– Quotes from George Friedman’s (of Stratfor) excellent piece from earlier this week “What Happened to the American Declaration of War?”  It can be found here http://www.stratfor.com/weekly/20110328-what-happened-american-declaration-war  This is MUST read for every American.

On the Road…Again
The last real vacation that I took was back in June when I spent six weeks driving around the United States of America.  The trip changed my life in a variety of ways, the most significant being the decision to move out of NYC to Colorado, which has so far been a fantastic choice.  Next week, I will be heading out to the West Coast for a little three week adventure, where I will be exploring parts of Northern California, Oregon and Washington state.  The latter two states I have never been to but I have heard fantastic things regarding the natural beauty and unique culture of the region.  After this journey is over I will have been to 44 of the 50 states.  For those that care, the ones still unvisited will be North Dakota, Minnesota, Oklahoma, Alabama, Kentucky and Alaska.  To be fair, I am not sure whether or not I have been to Rhode Island.  I think I went through there as a kid but seeing as I don’t remember the experience I am not convinced that should count.  In any event, the point is that most of you won’t be hearing from me for about a month.  While I would like to say things in the market will be calm during this period I highly doubt it.  Below I am going to try to outline some of the key things I would focus on while I am back on the road.

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The following correspondence was the reply to our objections in the establishment of the G5 in 1985 to “manage” the global economy through intervention on a coordinated basis.  Given the fact that the floating exchange rate system affords governments the freedom to now spend as they like pursuing their domestic policy objectives separate and apart from the international fiscal responsibility behind the value of the currency in global capital flows, it is simply unlikely that the current system will be sustainable long-term.  Volatility will rise and will spread among the markets driven by swings in currency values.  Eventually, in the course of events that will now follow, the global economy will become increasingly more unstable and reflect much higher degrees of volatility as historically has always taken place under floating exchange rate systems.  In the end game, the global economy will be attracted to the next major sovereign debt crisis that should appear going into 26 years from the 1985 birth of the G5 (2011) and perhaps culminate in a new global monetary system by 2016.
– Written by Martin A. Armstrong’s Princeton Economics International in 1986 (welcome to freedom Marty!)

Gold Breakout In Progress
Ok, let’s get right into it.  Gold first nudged above $1,400/oz in November of 2010 and has really for all intents and purposes been consolidating in a tight range between $1,350-$1,400 ever since.  Today’s breakout to new highs represents the fifth attempt to really get going beyond the high end of the range and this move appears to be the real deal.  Everyone likes to talk about the “dollar” and what it is doing but these folks are almost always referring to the DXY Index, which is about as useful an indicator as a Keynesian economist.  The reason of course is that the DXY is weighted 57% to the dollar/euro cross and in case your head has been in the sand for the last three years the European Union is a joke.  The citizens in the various countries whether on the periphery or Germany itself will increasingly want nothing to do with it and this sentiment will only increase as Brussels acts more and more like a despotic Medieval King when dealing with the broke nations.  But clearly the desires of the citizenry no longer matter as we have a self appointed global elite that think they know best and are busy cutting undemocratic deals and treaties behind closed doors (here is control freak Soros’ latest scheme http://www.mrc.org/bmi/commentary/2011/Unreported_Soros_Event_Aims_to_Remake_Entire_Global_Economy.html).  The more they do this the more the people will ultimately push back.  As I wrote last year, the irony of it all is the harder the incompetent “elite” push for their global government system the more likely we are to descend into even more fractured states and communities.  People don’t like to be told how to live generally, but will put up with it if the economic and social conditions are benign.  The moment that dynamic changes the people push back hard and revolt.  This is what is happening now and it will only escalate exponentially from here.

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We shall have world government, whether or not we like it.  The question is only whether world government will be achieved by consent or by conquest.
– James Paul Warburg appearing before the Senate on 7th February 1950

For more than a century ideological extremists at either end of the political spectrum have seized upon well-publicized incidents … to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure—one world, if you will. If that’s the charge, I stand guilty, and I am proud of it.
– David Rockefeller in his autobiography, Memoirs

Before I get into it I want to pose a question for all of you to ponder this weekend:

What is more dangerous, building nuclear power plants on major fault lines or allowing Central Bankers to play God?

 

Bernanke’s Ring of Fire
The horrific human and societal tragedy that has befallen the people of Japan over the past week has brought up many questions with few answers.  One of the most frequent questions I have heard is why would anyone every build nuclear power plants on a major fault line that everyone knew would one day experience a nightmarish earthquake like the one that occurred last Friday?  I am not going to try to answer that question although I think there are many reasons ranging from the fact that Japan is a nation short on natural resources like oil and coal to the fact that there is a strange aspect of human nature that causes us to repeatedly think we can overcome the forces of nature with our superior intelligence manifested in technological advancements.

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If we are to have another contest in the near future of our national existence, I predict that the dividing line will not be Mason and Dixon’s but between patriotism and intelligence on the one side, and superstition, ambition and ignorance on the other.
– Ulysses S. Grant

Mubarak has been an ally of ours in a number of things. And he’s been very responsible on, relative to geopolitical interest in the region, the Middle East peace efforts; the actions Egypt has taken relative to normalizing relationship with – with Israel. … I would not refer to him as a dictator.
– United States Vice President Joe Biden

Stuck in a Time Capsule
I remember as a kid on several occasion putting together a time capsule as part of a school project.  I am sure many of you reading this have done a similar thing at some point.  The concept is simple and elegant.  The group involved in creating the time capsule picks various things from their current society or culture that they feel is representative of the environment at the time and then they bury these items so that future generations can get a glimpse of what life was like for people in a prior time.  The reason humans have a desire to perform acts such as this is because our collective consciousness understands how much things change over time.  Empires rise and fall, major belief systems dominate and then become discredited, broad concepts of what is considered acceptable human behavior with respect to our fellow human beings also change and vary within different cultures over time.  Everyone knows the saying “nothing is certain except death and taxes.”  Actually this is garbage.  Taxes may be certain in the current society we live in but there is nothing eternal about taxes.  It is entirely a human creation.  I would replace taxes with the word change (not Obama change, real change).  From my perspective the one thing in addition to death that is certain in humanity’s existence is change.  Volatile, massive change.  What confuses people is that this change happens very suddenly and seemingly out of nowhere to those only paying attention to the establishment parrots that assure you all is stable and ok because they are the elites and they want things to stay the same.  They want that giant boot stamped firmly on your face forever.

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An evil deed does not produce its results at once.
It smolders slowly, like a fire covered by ashes,
And finally consumes its doer the fool.
What a fool hungers for
Is false fame, authority,
Power over others, and generous offerings.
He seeks recognition as a doer,
A wielder of power,
A knower of right and wrong.
His craving and pride are insatiable.
–  The Dhammapada, Chapter 5, “The Fool”

Whoever neglects doing good
Is inviting addiction to evil.
–  The Dhammapada, Chapter 9, “Evil”

Life is easy to live for the shameless man,
Aggressive, arrogant
Intrusive, and corrupt.

Life is not easy to live for a modest man
With high values, free from attachment,
Humble, of right livelihood,
And clear vision.
–  The Dhammapada, Chapter 18, “Blemishes”

This Game is FAR from Over
Before I get into it, I want to send out a heartfelt thank you to everybody involved in this epic battle for decency in the global monetary and financial system.  Many of the people that I have collaborated with over the incredible period of my life which has been the past year were, like me, completely brainwashed about how things really worked for much of our lives.  Upon finding out the truth, we quickly understood that silence is was not an option.  Not speaking up and fighting against the cruel and unjust system in place today is the equivalent of not fighting against slavery one hundred and fifty years ago.  It is one of those cruel jokes of history that human beings are rarely able to see the gross injustices of their own times yet they look back at practices of the past with horror all the while assuring themselves they never would have accepted such behavior if they had been alive.  The truth of the matter is that most of these individuals would have likely sat obediently in silence in those eons past, not having dared to rock the boat as they just tried to “get by.”  While unfortunate, this is simply a reality of human nature.  This is why I want to say thank you to all those that refused to shut up.  Those that didn’t fear the banksters, politicians and other thugs that are systematically attempting to turn America and the world into a neo-feudalistic nightmare wrought in their sick and twisted entirely self-interested image.  Many of the people I want to thank are on this list and many are not.  I want to say thanks to Glenn Greenwald and Matt Taibbi, neither of whom I know personally.  I am signaling them out because they are what you would describe as “progressives” or people that would normally support and defend Obama and his fascist policies because he on the “blue team.”  Despite this, they have not only criticized him as harshly as anyone but have done so relentlessly in the pursuit of truth and justice.  It is very easy to stand up and yell I love the Constitution when the “other team” is in power so let’s see if the “conservatives” in this country defend liberty and the Constitution to the same degree when a “red team” player is in charge.  I suspect many of them won’t, just like many “progressives” defend Obama like mindless sheep.  This is why many in the Republican establishment are so afraid of Ron Paul.  Because he is the real deal.  See this article.

http://www.politico.com/news/stories/0211/49412.html

How about this line:  “Rep. Paul is clearly off his meds and must be purged from public office. YAF is starting the process by removing him from our national advisory board. Good riddance and he won’t be missed,” added Marks.  Notice he used the extremely charged word “purged.”  This was no oversight.  Young Americans for FREEDOM they call themselves?  Sounds like a bunch of little American Nazis to me.

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They had then learned how easy it is to issue it; how difficult it is to check its over issue; how seductively it leads to the absorption of the means of the workingmen and men of small fortunes; how heavily it falls on all those living on fixed incomes, salaries or wages; how securely it creates on the ruins of the prosperity of all men of meager means a class of debauched speculators, the most injurious class that a nation can harbor,—more injurious, indeed, than professional criminals whom the law recognizes and can throttle; how it stimulates overproduction at first and leaves every industry flaccid afterward; how it breaks down thrift and develops political and social immorality. All this France had been thoroughly taught by experience.

Everything was enormously inflated in price except the wages of labor. As manufacturers had closed, wages had fallen, until all that kept them up seemed to be the fact that so many laborers were drafted off into the army. From this state of things came grievous wrong and gross fraud.
–  Andrew Dickson White, “Fiat Money Inflation in France”, How it Came, What it Brought and How it Ended

Where the road is dark and the seed is sowed
Where the gun is cocked and the bullet’s cold
Where the miles are marked in the blood and gold
I’ll meet you further on up the road

Further on up the road
Further on up the road
Where the way dark and the night is cold
One sunny morning we’ll rise I know
And I’ll meet you further on up the road
–  Bruce Springsteen, “Further On”

 Globalization is Dead
I debated whether or not to write today.  To be completely honest I feel as if I have said as much as I can and don’t want to start sounding like a broken record.  That said, we have clearly entered the next stage in this tragic circus called the global monetary and financial system death spiral.  The final stage comes when the system consumes itself as a result of its refusal to reform and we are there now.  The fact that most people are completely unaware of it or have such strong “normalcy bias” they can’t see what is directly in front of their faces is immaterial.  It is here, it is irreversible, and it will unleash a cyclone of chaos and confusion that will leave many literally suspended in disbelief as the entire false paradigm most of humanity has lived under for their entire existence is washed away forever.

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Terrorism is the best political weapon for nothing drives people harder than a fear of sudden death.
– Adolf Hitler

Sometime around the year 2005, perhaps a few years before or after, America will enter the Fourth Turning. A spark will ignite a new mood. It will catalyze a Crisis. In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. It could be a rapid succession of small events in which the ominous, the ordinary, and the trivial are commingled.

Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation and empire. The very survival of the nation will feel at stake. Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression
–  Strauss & Howe in “The Fourth Turning” written in 1997

All people who try to get elected to government are in love with government, it’s just that the Democrats are in love with one kind of government and the Republicans are in love with another kind of government, and government is going to continue to grow until there is revulsion for government.
–  Jared Dillian (he puts out a great daily piece I would look into it at http://www.dailydirtnap.com/)

The Global Revolution:  Welcome to Phase Two
When first I mentioned the food riots in Tunisia and Algeria in my note two weeks ago the former authoritarian leader Zine al-Abidine Ben Ali had yet to flee to Saudi Arabia with much of his nation’s gold.  What I find so amazing about this whole situation is why someone in their right mind would take the time to take some shiny little element that is in a bubble and that you can’t eat in the chaos surrounding one’s escape to another nation.  Surely he has hidden foreign bank accounts and since gold is just another “fiat” currency according to a Wall Street strategist, why bother?  He must be some right-wing radical that likes the Constitution and is therefore anti-American.  Isn’t that right Mr. Potok?

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The people must be helped to think naturally about money. They must be told what it is, and what makes it money, and what are the possible tricks of the present system which put nations and peoples under control of the few.
– Henry Ford

U.S. investors should welcome, not fear, climbing commodity prices.  The increases are “largely a reflection of the fact that the pace of economic growth, particularly in the U.S., has picked up,” said Nariman Behravesh, chief economist at consultants IHS in Lexington, Massachusetts, and a former Federal Reserve official who has been covering the global economy for more than 35 years. “It’s not something to be worried about.”
– Bloomberg article from yesterday

Why Fiat Money is Immoral
Today’s email is going to be a little different.  A couple of weeks ago a friend of mine from NYC who is not in the business but is on my weekly email distribution list asked me to explain fiat money and why I think it is the wrong way to go.  Below I am going to paste my response to her.  There is so much disinformation out there about money it is scary.  Sadly, the strategist at my former employer added to this several weeks ago.  He wrote:  “Gold, which is effectively just another fiat currency.”

Clearly he failed to look up the definition of fiat currency.

Fiat money is money that has value only because of government regulation or law.

Definition of Fiat:  An authoritative or often arbitrary official order or decree.  THIS DOES NOT EXIST TO GOLD AS MONEY TODAY AT ALL.

Gold is not money under “fiat” in any country at the moment.  Rather the market is making gold as money today which is the OPPOSITE of fiat money.

With that off my chest, here is the response to my friend…

Ok, so let’s do a brief thought exercise on why I believe commodity money is preferable to fiat money.  When you have fiat money, a government, or in the case of the United States today, a banking cartel (the Federal Reserve), is granted exclusive authority to create the nation’s money.  Laws are used to enforce the use of this money otherwise people probably wouldn’t use it.  Under a commodity money system, where let’s say the U.S. issues dollars but those dollars are backed or convertible to a commodity (in many cases gold but it can be other things) there is a limit to the amount the government or banking cartel can print or issue and this is in relation to the amount of the commodity that exists or is available to the government or central bank.  The current propaganda that is rife throughout economics textbooks and the like tell is the notion that commodity money is bad since it stifles human innovation in relation to the amount of gold or whatever commodity used.  They say this is bad and that there should be no “limit” on money creation based on something as arbitrary as a commodity and that this is bad for growth.  This is complete nonsense and is used to keep people in the current fiat system where money power is exercised most egregiously by the few against the many.  The reason they defend the current system is simple.  With the power to create unlimited currency at will (via the Federal Reserve) you possess total and absolute power over almost EVERYTHING in the economy and society at large.  The Fed not only creates the money but they distribute it where they want.  In QE1 and QE2  they decided to buy specific assets.  In the case of QE1 where they bought toxic assets, this was just another bailout of the banks and others that made poor investment decisions.  Did the money go to build new schools?  No.  Did the money go to build high speed trains as is done in China?  No.  Did it go to building out massive alternative energy infrastructure?  No.  It went to save the banks because at the end of the day the Fed exists as a backstop to the banks and it is to the banks that the Fed answers to at the end of the day.  It is a brilliant scam that 95% of Americans do not comprehend.  So in this case all of the money is going to the banks (which destroyed the global economy in the first place) and other players in the financial world.  Remember, the banks ARE the Fed and the Fed creates the money.  Gate keepers at the Federal Reserve and academia make understanding economics, the Fed and money seem so “complex” but the scam is really VERY simple.

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